Dubai has been at the center of a debt storm since flagship conglomerate Dubai World <DBWLD.UL> rocked global markets on November 25 with a request to creditors for a standstill agreement on $26 billion worth of debt.

Dubai Group, an investment vehicle whose parent company Dubai Holding is undergoing a transformation to help it weather the crisis. Based on a share price of 0.544 rial at 0745 GMT, the 41 percent stake in ONIC is worth just over $90 million.

In October, Dubai Group said it would reassess its investment strategy and was reviewing options to sell its stake in Malaysiaâ€™s Bank Islam. In December, it sold a 7 percent stake in Egyptian investment bank EFG Hermes <HRHO.CA> for $120 million.

â€œWe expected some rethinking on the strategy and on which assets to divest and this is proving to be consistent with that,â€ said Ali Khan, managing director and head of brokerage at Arqaam Capital. â€œWe will likely continue to hear about other assets being divested that donâ€™t fit the groupâ€™s strategy.â€

Talks with ONIC are in the preliminary stage and no written mandate has been agreed upon, the sources said.

However, it could be difficult for Dubai Group to get a â€œsignificantâ€ premium for its stake as ONIC stock has risen on hopes the Oman investment firm may reach a separate deal to sell one of its insurance subsidiaries, one of the sources said.

â€œONIC has been in the market trying to sell their insurance subsidiary and the stock has been rising on that,â€ the source said without revealing more information about the deal. ONIC shares have risen more than 60 percent in the past six months.

A potential stake sale will have â€œno impactâ€ on ONICâ€™s short-term prospects, said Mohammed Hassan, general manager of United Securities LLC.

Executives at Dubai Group and ONIC would not comment.

Dubai Holding bought a 35 percent stake in the Omani firm in 2007 from Shuaa Capital <SHUA.DU> through its investment arm, Dubai Financial, a unit of Dubai Group.

Dubai Holding has about $1.9 billion of debt maturing in the first half of 2010.